If you follow discussions about the Internet of Things, you’ve probably heard this stunning prediction at least once: The world will have 50 billion connected devices by 2020. Ericsson’s former CEO Hans Vestburg was among the first to state it in a 2010 presentation to shareholders. The following year, Dave Evans, who worked for Cisco at the time, published the same prediction in a white paper.
Today, that figure has arguably done more than any other statistic to set sky-high expectations for potential IoT growth and profits. Remarkably, those projections weren’t even close to the highest of the time—in 2012, IBM forecasted 1 trillion connected devices by 2015. “The numbers were getting kind of crazy,” recalls Bill Morelli, a market research director for IHS Markit.
Now it’s 2016, and we’re nowhere near 1 trillion IoT devices, or even 50 billion for that matter. The current count is somewhere between Gartner’s estimate of 6.4 billion (which doesn’t include smartphones, tablets, and computers), International Data Corporation’s estimate of 9 billion (which also excludes those devices), and IHS’s estimate of 17.6 billion (with all such devices included).
Since they first made their projections, both Ericsson and Evans have lowered their expectations from 50 billion for 2020: Evans, who is now CTO of Stringify, says he expects to see 30 billion connected devices by then, while Ericsson figures on 28 billion by 2021. Other firms have adopted similar tones: IHS Markit projects 30.7 billion IoT devices for 2020, and Gartner expects 20.8 billion by that time (excluding smartphones, tablets, and computers). Lastly, IDC anticipates 28.1 billion (again, not counting those devices).
Meanwhile, the popular 50 billion figure continues to be widely cited. Even Evans is a bit surprised by its lasting power. “I think people do tend to latch onto numbers that seem really hard to fathom,” he says. “Fifty billion is pretty staggering.”
Forecasting the future is no easy task, and there’s nothing unusual or wrong about analysts and companies revising their projections. However, IoT forecasts are especially large with significant variability among firms and over time, skewing tens of billions of units in either direction.
At the same time, any market with such potential girth dazzles entrepreneurs and investors. For comparison, 18.6 billion microcontrollers were shipped in 2014, and 10.4 billion RFID tags will be shipped this year. Given the forecasts, IoT is expected to top them all. “I don’t think we’ve seen this type of market size before, to be honest,” says Vernon Turner, a senior IoT analyst for IDC.
Peter Middleton, a research director at Gartner involved in the firm’s IoT forecasts, says future IoT projections are intended to create “market efficiency,” helping companies make smart choices about whether they should enter a new area and informing venture capitalists as they decide where to place their investments. Earlier this week, Intel executive Venkata Renduchintala emphasized the company’s enthusiasm for IoT in a keynote at its annual developers’ forum.
Still, it would seem the practical utility of IoT estimates is limited if they have the potential to be revised by many billions of units. Turner at IDC says such variation and fluidity of these numbers is typical of early estimates focused on nascent markets. The point, he suggests, is to think of the estimates as a general signal, rather than focus on the specific numbers.
There are many reasons why projections from different firms may change over time, or simply not match up in the first place. Each company starts with its own definition of IoT and refines its methods over time.
To begin, many collect annual sales data from manufacturers that produce connected devices, or components such as semiconductors, as well as from companies that sell and ship those products to customers. Then firms subtract a percentage of devices to account for those that will be replaced or thrown out each year. When added to estimates from past years, that leaves the firms with the “install base,” or approximate number of connected devices in use at a given time.
Some firms include other variables, such as the amount of money that companies spend annually on information technology. Evans factors in industry growth rates based in part on Moore’s Law, the longstanding prediction that the number of transistors in an integrated circuit doubles every year or two, and Metcalfe’s Law, which states that the utility of a network increases with each new device that connects to it.
Firms often have no real way to know how many devices that are sold and shipped actually wind up connected to the Internet, so some conduct consumer and business surveys to gauge how devices are used. Morelli at IHS Markit estimates 90 percent of communications devices (including smartphones) are switched on, but perhaps only 50 percent of cars and accessories are ever connected.
Janna Anderson, an expert in emerging technologies at Elon University, says there is a degree of self-interest at play in projections, too. In 2013, she helped the Pew Internet Project survey more than 1,600 experts about what the IoT might look like in 2025. Not surprisingly, she found that “those who are marketing it and those whose bottom line is somehow impacted by enthusiastic predictions are more likely to make them.”
Middleton at Gartner, who publishes one of the most conservative IoT estimates available, also believes boosterism plays a role in some analyses. “It’s human nature,” he says. “If you’re a participant in the industry, and you’re launching new products, there’s a lot of enthusiasm that builds and a lot of hype.”
One of the puzzling things about IoT estimates is that they attempt to anticipate demand for devices that have largely not yet been invented or commercialized. At this point, even the strictest definitions of IoT remain fuzzy because companies are still working on the technologies and business cases. “Will connected pets be a thing of the future? No one knows,” Evans says.
In fact, IoT skeptics often point to Bluetooth-enabled toasters as an example of senseless connectivity that will only ever be used by a handful of early adopters. But Evans is confident that entrepreneurs will find many millions of practical ways to serve customers through the IoT in due time. “I think technology needs to solve real problems, and if it doesn’t solve real problems in the real world, it’s probably a gimmick and will die on the vine,” he says.
Though past estimates haven’t exactly panned out, Bob Heile, standards director for the Wi-SUN Alliance and chair of IEEE 802.15 (a working group for wireless personal area networks), says the general trend that early IoT analysts predicted has proven true. There are more and more connected devices today than five or 10 years ago, even if they’re being connected at a slightly slower rate. “What I do know, because the trend is absolutely undeniable, is more and more things are getting the ability to communicate and connect to something else,” he says.
As the next 10 billion IoT devices come online, the industry will face some formidable challenges, such as ensuring the security of its devices, powering billions of sensors, and handling all the resulting e-waste. Despite those issues, Evans isn’t bashful about anticipating an even bigger future. “I could see trillions of connected things, ultimately,” he says.